Suppose the price elasticity of demand for a good is - 0.2. If there is a $5 %$ increase in the price of the good, by what percentage will the demand for the good go down?

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Solution

Given, change in price (increase) $= 5 %$

Elasticity of demand $(E_{d}) = - 0.2$

$(E_{d}) = \frac{% Change in Quantity demanded}{% Change in price}$

$(-) 0.2 = \frac{% Change in Quantity demanded}{5}$

$%$ Change in quantity demanded $= - 1 %$ (decrease)

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Suppose the price elasticity of demand for a good is - 0.2. If there is a 5% increase in the price of the good, by what percentage will the demand for the good go down?

Given, change in price (increase) =5% Elasticity of demand (Ed)=−0.2 (Ed)=%Change in Quantity demanded%Change in price (−)0.2=%Change in Quantity demanded5 % Change in quantity demanded =−1% (decrease)

Suppose the price elasticity of demand for a good is - 0.2. If there is a $5 %$ increase in the price of the good, by what percentage will the demand for the good go down?

Given, change in price (increase) $= 5 %$

Elasticity of demand $(E_{d}) = - 0.2$

$(E_{d}) = \frac{% Change in Quantity demanded}{% Change in price}$

$(-) 0.2 = \frac{% Change in Quantity demanded}{5}$

$%$ Change in quantity demanded $= - 1 %$ (decrease)